Columbia City Cinema Ordered to Stop Selling Shares of Stock

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Paul Doyle, the CEO of Columbia City Cinema on Rainier Avenue South, had what he thought was a brilliant idea to save his cash-starved movie house from being shut down at the end of the year. All he had to do was sell shares of stock in the company and raise a bunch of money, then, when things were going good again, folks would get their investments back. It's the American way! Unfortunately, he's now learned that the selling of securities is a closely regulated transaction with rather strict and complicated rules. You can't just start up a Facebook page, talk to the media, and start collecting cash.

The Washington State Department of Financial Institutions just filed a legal order for the cinema to stop selling stock and await further notice of how much they'll be fined for violating the Washington Securities Act, after Doyle's registration paperwork wasn't adding up, or simply wasn't completed.

Per the Washington State DFI:

Columbia City Cinema, Inc. began the process to register its stock for sale to the public but did not complete that process. The Securities Division alleges that the registration statement filed on behalf of Columbia City Cinema, Inc., for an offering of $450,000 worth of the company's common stock, is incomplete in a material respect or contains statements which are false or misleading...

Doyle talked to Seattle Weekly today, saying he "didn't know we'd be taken so literally" when he advertised the stock offering and that he felt the DFI should have walked him through the process better.

"I was astonished at the DFI's response," he says. "You'd think they'd be interested in helping you. Instead, they saw the mistakes I was making, then waited until I accumulated enough, then they sprang this on us."

Perhaps, but Doyle likely would have benefited in waiting until after he worked out his rookie kinks with the state agency before he "went public" with a stock offering.

Doyle also says that he "wasn't intending to sell stock" until after it was fully registered. This despite a Facebook page set up in mid-November saying this:

We're serious. Starting Friday, November 19, we have 43 days until December 31 to sell 50,000 shares of stock or we're gone after a six and a half year run.. We need to sell about a thousand shares a day. We've made a good start but we have a ways to go. So think about us this Thanksgiving. We can't imagine not making our initial goal, but you get your money back if we don't.

So while we understand the inclination to want to use stock sales as a means of creating a quick influx of capital, it's not really something that can be done in a one-and-a-half-month time frame. And it's apparently not something that can be done while the paperwork is pending.

That kind of quick-hit fund raising is traditionally accomplished via bake sale and/or bikini car wash.

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